Tax-Reform Postmortem: Plans Killed in Elections

Gov. Robert P. Casey's high hopes for sweeping changes in
Pennsylvania's revenue system were dashed last week as voters soundly
rejected a statewide referendum on tax reform.

The bipartisan proposal, which was opposed by about 75 percent of
those voting in the May 16 election, had won legislative approval
literally minutes before the 1988 session ended last November.

Aides to the Governor and state education groups had then dubbed the
tax-reform bill a "legislative miracle" that seemed to have finally
captured the right balance of compromise on the issue.

But the legislation depended on voter approval, and, as one
education lobbyist said last week, "The voters have spoken."

In the wake of the constitutional amendment's rejection, observers
noted a sharp division in the General Assembly over what had been a
bipartisan issue. Republican lawmakers were quick to blame the failure
of the Democratic Governor's proposal on his own inability to sell the
idea.

At a midnight news conference after the polls had closed, Governor
Casey attributed the defeat to the complexity of the issue and
confusion over the reform's potential effects.

"Somehow the message did not get through," said the Governor, who is
expected to run for re-election next year. "The average person had
difficulty relating the benefits of the plan to their own individual
circumstances."

The proposal would have shifted the burden of local taxes away from
property and toward income, which the Governor argued would create a
fairer system over all.

It also called for the elimination of so-called "nuisance" levies,
such as occupational-assessment, per-capita, and residence taxes.

School districts and municipalities would have been allowed to
increase their income taxes by up to 1.5 percent over four years, in
return for property-tax reductions of at least 25 percent.

But the plan also included a series of complicated minor
points--such as exemptions for Philadelphia and other "home-rule"
municipalities. Backers of the plan said their opponents highlighted
the more complex details to confuse voters.

The amendment's defeat means disticts will continue to rely on
property taxes as their main source of local revenue.

State education groups, which lobbied heavily in favor of the plan,
say the current tax system is regressive and unfair. They argue that it
relies on outdated property-assessment practices, and leaves the burden
of school funding on homeowners who are retired or on fixed incomes and
can ill afford to pay skyrocketing real-estate tax rates.

"These taxes simply do not reflect a person's ability to pay," said
George Badner, a spokesman for the Pennsylvania State Education
Association."

Spokesmen for education groups that supported the plan said last
week that they were surprised that the referendum was rejected by such
a wide margin.

"No one realized it would be so one-sided," Mr. Badner said. "Either
the voters didn't understand it, or they didn't buy the Governor's
message. Or maybe it was just fear of change."

"It's very difficult to assess whether this was a rejection by
voters of this plan in particular, or of tax reform in general," added
Thomas J. Gentzel, director of government relations for the
Pennsylvania School Boards Association.

Mr. Gentzel predicted that state lawmakers would be unlikely to
revisit the issue this year after spending nearly two years hammering
out the first proposal.

"That plan wasn't perfect, but it was the best the legislature could
pass," he said. "There just is not a 'Plan B' to turn to."

In his statement last week, Governor Casey noted that the flawed
nature of the current tax system "would not go away by itself."

"We put a plan on the table and showed how we could pay for it," he
said. "Now it's up to others to come up with a new plan, put it on
paper, and tell us how we can pay for it."

Mr. Gentzel said education groups were "anxious to see what new
alternatives may be out there."

Meanwhile, Mr. Badner noted that members of the psea and 12 other
education groups were planning to rally at the state Capitol this week
to lobby for increased spending on education.

Mr. Badner contended that the rejection of the reform plan would
force districts to rely more heavily on state subsidies--especially in
communities where property taxes are already high.

Currently, the state covers about 43 percent of districts' costs.
Education organizations are urging that the proportion be raised to 50
percent. Mr. Casey's proposed budget, however, would reduce the figure
to 41 percent.

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